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Has the Stock Market Crash Begun?

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Image: CDC. Transmission electron microscopic image of an isolate from the first U.S. case of COVID-19, formerly known as 2019-nCoV. The spherical viral particles, colorized blue, contain cross-section through the viral genome, seen as black dots. Dear members: This article is our fourth update on COVID-19. The previous three installments can be found here (Feb 22), here (Feb 7) and here (Jan 31). We trust you and yours are well during this global crisis. It’s hard to turn on the television these days without hearing about COVID-19, a novel coronavirus and respiratory illness that continues to spread from person to person around the world. COVID-19 is deadly, and particularly deadly among those 60 years of age and older and those … Read more

ALERT: Adding Market Crash ‘Protection,’ Removing MSFT, BKNG

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Image source: Centers for Disease Control and Prevention.  ALERT: Adding Market Crash ‘Protection,’ Removing MSFT, BKNG — Changes to newsletter portfolios — We’re adding out-of-the-money put options to both the Dividend Growth Newsletter portfolio and Best Ideas Newsletter portfolio. — We’re removing Microsoft from the Dividend Growth Newsletter portfolio. — We’re removing Booking Holdings from the Best Ideas Newsletter portfolio. — By Brian Nelson, CFA — We’re making some moves in the newsletter portfolios today.  — The Dow Jones Industrial Average (DIA) is currently indicated down 900+ points in pre-market trading during the session Monday, February 24. We laid out a thesis where the US markets could experience a “crash,” and we encourage you to read that take here, “Is a … Read more

Is a Stock Market Crash Coming? — Coronavirus Update and P/E Ratios

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Image Source: World Health Organization, Coronavirus disease 2019 (COVID-19), Situation Report — 32 We don’t think this is the environment to put new capital to work, and we remain highly cautious of what COVID-19 means for global economic growth not just in the first quarter of 2020 but for the rest of this year (maybe longer). Right now, the US markets are not really factoring in anything related to COVID-19, and perhaps may be adjusting to China’s stimulus in artificially propping up the markets as if the outbreak is somehow a “positive thing.” With the S&P 500 trading at 19.0 forward earnings estimates–estimates that are likely too high given the evidence we are seeing with respect to a slowdown due … Read more

Resetting Your Mental Model

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Image Source: affen ajlfe A version of this article was originally published on our website October 6, 2013. Having the right mental model and using the right information can be the reason why you win or lose in investing. “What is the definition of timeliness? Many believe it is getting information to investors as quickly as possible after an event, or updating something every single day or week for immaterial information. I believe in a different definition of timeliness. I believe timeliness is using all information available in a mosaic approach to accurately predict the event before it even happens. Take Kinder Morgan as the latest example. We were the only ones predicting what was going to happen before it did. To investors, … Read more

Trump “Tweet Storm” Reveals Increased Frustration with Fed, China

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— Markets are starting to look toppy. — By Brian Nelson, CFA — The markets are under heavy pressure Friday, August 23, as China escalated the trade war with new retaliatory tariffs on $75 billion worth of U.S. goods (soybeans and autos), including a 5% tariff on U.S. crude oil prices. Removing the Energy Select Sector SPDR (XLE) from the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio August 14 looks to have been a savvy move. Following the much-anticipated speech from Fed Chairman Powell today, President Trump responded with a series of tweets that showed tremendous frustration with the current situation. Here is the Twitter thread, reproduced below: — As usual, the Fed did NOTHING! It is incredible that they can “speak” without knowing or … Read more

Investors Aren’t Sold on Lear’s Ostensibly “Cheap” Valuation and Neither Are We

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Image Shown: While Lear Corporation appears attractive at first glance, its technical performance tells a different story. The market is concerned that the global synchronized downturn that has emerged will get worse, which would weigh on Lear’s expected financial trajectory. Global automotive sales are already coming under pressure, and there’s not much Lear, as a leading auto parts supplier, can do about that. We think the market might be right on this one. By Callum Turcan On August 16, we updated our reports for the auto parts supplier industry and those updated reports can be accessed here. Lear Corporation (LEA) stood out right away. The company supplies auto parts to customers all around the world, namely electrical power management systems … Read more

We Have Dropped Coverage of the Auto Parts Supplier Industry

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Image Source: Don O’Brien, Darryl Braaten Structure of the Auto Parts Supplier Industry The highly-cyclical auto supplier industry depends on economic conditions and consumer confidence. Volatile gas prices impact a supplier’s input costs and the types of vehicles demanded by consumers. OEMs have considerable bargaining power over suppliers in negotiating terms on largely-commoditized parts. The industry is regulated by environmental and safety laws, providing both challenges and opportunities. Suppliers have considerable operating leverage and remain extremely competitive, which prevents outsize economic returns over the long haul. In general, we don’t like the structure of the group. We have dropped coverage of the Auto Parts Supplier industry.

Tenneco’s Shares Undervalued Leading Up to Business Separation

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  Image Source: Tenneco fourth quarter earnings presentation We think shares of Tenneco are undervalued as the company gears up to complete a business separation in the back half of 2019, but we’re not interested in the stock as a great deal of uncertainty surrounds not only the company itself but the auto supplier industry in general. Expectations for a decline in global light vehicle production in 2019 coupled with heightened concerns over the pace of global economic growth do not bode well for the group, and the auto landscape is one that may see material change in coming years. By Kris Rosemann The auto and transportation space continues to evolve, and companies in all verticals within it are working … Read more

General Motors Rallies, Tesla and Toyota Improve, Auto Parts Suppliers Getting Squeezed

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Image shown: General Motors may very well be on its way to $50+ per share. We continue to like General Motors, and we think Tesla is getting back on the right track with its financials. Auto parts suppliers have faced their fair share of pressure in recent months as the potential for a slowdown in global light vehicle production rises and input cost inflation also makes its presence felt. By Kris Rosemann and Brian Nelson, CFA On February 6, General Motors (GM) reported fourth-quarter 2018 earnings, and they were quite good. We continue to believe shares of GM are ultra-cheap, as we wrote in: “We Think General Motors Is Poised for New Highs.” The automaker is included as an idea … Read more

Valuentum Stock Screeners

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This article was sent to members via email December 29. That email can be accessed at the link that follows this article. By Brian Nelson, CFA Hi everyone, I wanted to provide an update with respect to Valuentum’s stock screeners. We believe our stock screeners are among the most robust when it comes to providing forward-looking data, or data that is important with respect to the investment decision-making process. We publish screens in each of the monthly newsletters, but we also provide a basic weekly screener for download on the left column of the website, “Download Weekly Stock Screener (xls) — login required.”   We also have other products. The more robust DataScreener, for example, is part of the quarterly Financial … Read more